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GlacierBayDVD owner Randy Smythe has been speaking out about his experience as eBay's number two PowerSeller and his company's subsequent failure. In an interview with AuctionBytes, Smythe revealed what went wrong, and about the issues of multi-channel selling. In Part 3, published here, Smythe talks about some of the issues facing eBay sellers today. (Interview has been edited for length.)

AB: What are the biggest challenges for eBay sellers right now?

RS: There are a number of challenges, I'm not sure I can rank them. The fees are only a subset of what the problem is. It's the fees in conjunction with less visibility at Stores. They don't have to go back to, in my view, full Stores in Search. But they raised fees to what close to Core is, and they reduced the visibility of Store items, so it's a double-whammy.

For the Store sellers, the biggest issue is fees in relationship to less visibility. I don't have any problem with eBay raising fees, I think they were low, I don't know they needed to go as high as they did.

But if they gave them some benefit from the extra fees, I think there would be a lot less pain and a lot less discontent.

So that's one, the other thing is right now what's happening is, the Market for Lemons. It was a Nobel Prize winning article, and it talked about, I'm not even sure I can explain.....

AB: I think someone at BuySafe has talked about this online, it sounds really familiar.

RS: What it basically says is what's happened in the marketplace is that you've got a seller who has more information than the buyer has about the product, so he has an advantage. And eBay relies on feedback to be the guiding - it's supposed to guide you to who's the best sellers. The almighty feedback.

I think Meg said that on average one out of every 1,000 items is a negative, so that's 99%, well that means on average, every seller on eBay is 99%. Then where do you make the differentiation? If everybody is 99%, then do you go for 99.5%, is that good?

The feedback system doesn't do the work, and you have the seller who has more information and put up information about - like these guys who put up DVD copies and say they are new. The buyer gets it, and if it works, the buyer generally says, well it worked. If it doesn't work is when they complain.

So you have all the stuff out there - sellers doing the wrong things, there's no control over them at all. Trust & Safety - I don't know what they do.

Other than the fact that they shut us down for having an R-Rated movie up. At one point early on they shut down 5,000 of my auctions because I had an R-rated movie that was listed. So I said, tell me what the guidelines are, and they said if you can't sit in a room with your 13-year-old daughter, and watch this movie, you shouldn't put it up on eBay. And I just went ballistic.

AB: Is it a rule that you can't list R-Rated movies?

RS: No, it was actually "Old School" unrated. So I said, well give me a definition of what I can list, and they said, we don't do that. We don't tell you what you can do, because we're just a venue, because if we told you, then we wouldn't be a venue. But we'll just sporadically take stuff down.

AB: So you're saying the biggest challenges are fees in conjunction with less visibility in Stores, and the idea that sellers have no way to differentiate themselves because feedback isn't doing the job it's supposed to do, and basically bad sellers can appear to be the equivalent of a good seller? There's just no way to differentiate yourself, and Trust & Safety is not really - you don't know what they're doing. Are they ineffective, would you say?

RS: They are ineffective and they try these initiatives where they went after the media sellers for putting up CDs that had cussing in it. Well, we're using their database. And we kept on telling them, you're coming down on us, it's your database. And they said, No, that's not our responsibility, it's your responsibility. And so they close auctions, they wreak havoc on you, and that's what they do, and that's what they do to the good sellers.

AB: It's an interesting idea what you said about sellers being able to differentiate themselves. What's the answer?

RS: I really do think there is. If it sounds like regulation - and I hate that word. But there has to be a third-party or some entity that is outside of eBay that registers sellers.

This is just my opinion, so take it for what it's worth. I believe eBay is flat not because the market is maturing, but they're flat because they haven't taken care of this issue.

I don't particularly care for that approach - registering sellers, but they do that on Overstock where they have the preferred sellers program, there should be some way to differentiate someone who is not registered and someone who is.

AB: Should eBay have discounts for high-volume sellers?

RS: I believe eBay should have some form of discount that allows sellers to grow. They don't believe that because they don't really want sellers to get big. And that's just again my opinion.

Because when sellers get big, they start asking for things. And again, it's just opinion, but I think that's another reason why they let me go. They kind of appease PESA. None of these big sellers on eBay are big sellers. In the rest of the world, we're small.

I wish eBay would realize that most people don't want to leave this place. They would really like to make it work here. I read on one of the boards the other day, a lady's husband had just died, and this was all she had.

When they created Stores, it worked and people were happy. I spent too much on Core. So people have this knowledge that Core doesn't work for a great number of products. Out of 40,000, I had 7,000 titles that i thought I could sell in Core.

I wouldn't even touch CDs in Core, it's too broad. Stores provided the long tail. Someone could find something in stores 2-3 months later when they were looking for it, it was there.

eBay wants velocity. They don't want a warehouse. They want velocity. And I don't think they can have it.

AB: We talked about the high-volume sellers, do you see a divide between the high-volume sellers and the low-volume sellers?

RS: I was a low-volume seller, I grew to become a high-volume seller. When you become a high-volume seller, you should be treated as a high volume seller. You should not be treated the same way as someone who's just starting. But at every level, everybody at that level should be treated the same way.

AB: Let me go to something you said in your article on Associated Content. You said, "eBay is a ship without a rudder." What did you mean, and what makes you think that? And how long has eBay been without a rudder?

RS: I believe that they have been struggling to find the next generation of eBay for probably about a year. I think that the first reason I said "a ship without a rudder" is when the Half.com thing came up. What they try to do is use economics to mold seller behavior. They basically told Half.com sellers they were going to be gone because they wanted all the books and everything on to eBay, and they couldn't move the booksellers. So they had to capitulate and keep Half.com open. In the meantime, it just ruined the media market on eBay.

That was the first straw. Then the next one was when they build up eBay Stores like the greatest thing since sliced bread, and said we're going to give you Stores in Search. And after giving everybody these great sales, they pulled it. That to me says that they don't know what they're doing. It just doesn't seem like they know what they're doing. They're trying things and they're not working, and what it does is, it just upsets the whole marketplace. And so that's why they're a ship without a rudder.

And here's another example, they're doing sponsored search. What do you want to be? Do you want to be a shopping portal, or a shopping destination? Make up your mind.

They're saying, well we need monetize our null searches, right? We have millions of null searches every single day, we need to monetize that. That's fine. But tell your customers, your sellers, that you're becoming a portal, so they can go and buy keywords from Yahoo and move on to their website and not pay you to list product on there. Because if you're going - there's a chicken and egg thing. If sellers believe there's not enough activity, there's going to be a lot of null searches, so that's another example.

AB: Meg Whitman has been captain of the ship for a long time. These changes you're talking about have been fairly recent. Is Meg still paying attention to eBay the marketplace? Is somebody else,...?

RS: Again, it's opinion, so take it for what it's worth. I think what's happened is that Meg has traveled the world to grow, she's become the investors'... It seemed earlier on, she had an opinion that eBay didn't make decisions based on stock price. Every decision they've made recently is reactionary in my view, because their stock price sucks. And so now they're in this quarter mentality, and that's causing them to make decisions,... For me to say these things, and be a guy who failed, it's kind of - take it for what it's worth. But that's just my opinion is that that's what's happening.

And if they could convey what their plan is to their sellers, they could do it in a way that's - there's no competition, so what are you worried about? You've got no competition, so why not convey to your sellers what your plan is? Do you have a plan?

AB: Let's go back for a second to Stores in Search, because you said Stores in Search actually led to sales, phenomenal sales, I think you said.

RS: Yes.

AB: If that's the case, then why did they pull it?

RS: Well, you'll get another opinion from me. What I think happened is, they realized that core would go away. It would be drastically reduced. Because the reason Stores was so successful is because people found a less expensive way to sell their product. If core was less expensive, then they wouldn't have left core. So what happened is that when Stores started to sell, word gets around, and people stopped listing auctions.

AB: But here's the question, does it matter to the buyer if they buy on core or buy on Store, and if they're buying, what difference does it make to eBay if they still get a commission?

RS: Because they make their money on the listing fees. They don't make their money on final value fees. I mean they do, but 5 percent on,...

AB: They make their money on listing fees on core?

RS: Now they're making their money on listing fees on Stores. Once the listings started to fall, they realized their model - a majority of revenue comes from listing fees - started to fail.

AB: So what you're saying is that it was about eBay's revenue, not about the buying experience? Or did it hurt the buying experience?

RS: Well again, I believe that it was revenue, rather than buying experience, but I'm sure they got enough buyers to complain that they could legitimately say it was buyer complaints. That's just my view. I mean, I don't think they were completely disingenuous. I think they actually had people complaining.

But people were finding product. If there's some way to get the data that GMV did not decrease during that period but the revenue from listing fees dropped drastically, there you would have your answer.

And instead of trying to figure out a way to make it work, they just did this automatic, we're just going to try and get rid of a lot of product on Stores. We're going to raise the fees so you have to remove product. We're going to force you to remove product, or it's going to cost you a lot of money.

It's all punitive, it's kind of like a daddy saying to kids, you're not going to get dinner. And so, I think all those things combined have caused this distrust and everything else that's going on.

AB: I think people are going to be really curious about GlacierBayDVD, so I wonder,...what's your situation?

RS: A couple of people picked up on my article and started questioning my motivations. I discussed this with my dad, and I just want to speak out. I don't know if anybody wants to hear it, but I want to speak out. This stuff bothers me, I really care about this marketplace. So he said, well just do it.

As far as what I'm doing now, I'm actually excited about it, I've never done this speaking out kind of thing, I kind of like speaking out. So I'm going to write, and I'm going blog.

AB: Yes, when I saw that, I was wondering if you were thinking about writing a book.

RS: Well I am, actually, I've already got it outlined, but I wanted to see first of all is if there's any kind of market for it at all, and if people really cared.

I believe that they did, but until I actually put it out there, I don't know that they care. I mean, I went out of business.

Bear Stearns put in their thing, an eBay pioneer, (on the invite for the conference call for Friday), and I kind of laughed , but it's true, I was a pioneer.

And I think that's probably why I had a little bit more credibility out there. So that's kind of what I'm doing, so I'm open, I know eBay won't hire me.
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Part 1 of this interview can be found online at http://auctionbytes.com/cab/abn/y06/m09/i29/s01.

Part 2 can be found online at http://www.auctionbytes.com/cab/abn/y06/m10/i02/s02

Comment on this interview series on the AuctionBytes Blog at http://digbig.com/4nden.

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About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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